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Date: May 4, 2022
Posted by: CPDMA Team

The distribution of profits by companies undergoing judicial reorganization

Three central piles of coins, inside a circle, from which three arrows point to three other smaller piles of coins that are next to a pawn.

It is not rare that we can see companies whose partners have a low income and complement their income through anticipation of dividends. The practice, [1] however, it was not aligned with the precepts of the judicial recovery and the debtors' state of insolvency, since the partners would be withdrawing the dividends while the creditors were waiting for the receipt of their credits, bearing alone the length of the procedure. 

The Law 14.112/2020 inserted art. 6-A, whose provision explains that the debtor is forbidden, until the approval of the judicial reorganization plan, to distribute profits or dividends to partners and shareholders, subjecting the offender to the provisions of art. 168 of Law 11,101/2005, which provides for imprisonment from 3 (three) to 6 (six) years, and a fine for fraudulent act.

Prohibiting the outflow of resources to preserve assets to creditors and distributing the burden of the judicial recovery process are among the grounds that led to the insertion of the legal provision. For this reason, any adjustment to the remuneration of the partners must be consistent with market practices, preventing the problem from being inverted, making, for example, pro-labore a form of disguised distribution of profits. In this sense, it is important to emphasize that the payment of pro-labore was not prohibited by the new legislation, nor is there any prohibition for its eventual increase.

The Law does not make it clear whether the aforementioned distribution contained in art. 6-A deals with the declaration or payment of dividends. The doctrine questions whether the declaration prior to the reorganization can be paid after the processing of the judicial reorganization. Fabio Ulhoa Coelho[1] understands that because it is an exception rule, the interpretation must be restrictive, allowing payment during the recovery process, provided that there is a declaration before the process is initiated. On the other hand, Sérgio Campinho[2] understands that the expression “distribute profits or dividends” refers not only to the declaration, but also to the payment, since the intention of the Law is to prohibit the outflow of resources. 

With due respect to the different interpretations, we understand that the claims of partners declared and not paid before the entry of the judicial reorganization, are subject to its effects and, in the event of bankruptcy, they are subordinated claims and could only be paid after the payment of other claims. such as: extra-competition credits, labor credits (up to 150 salaries), credits with real guarantee, tax credits, unsecured credits, etc.

The restriction, according to the legislator, should last until the plan is approved, which takes place at the end of the general meeting of creditors set up for this purpose. It so happens that the effects of the plan's approval will only come into existence with the judge's approval, at which time the recovery is effectively granted, passing through the sieve of legality control.

Even if the time lapse between the approval of the plan by the general meeting of creditors and the granting of recovery by the judge is usually days - at most weeks -, there will be cases in which the issue will need to be addressed, and it is up to the courts to define the final term. restriction so that there are no misinterpretations that lead to the investigation of the practice of bankruptcy crime.

Finally, the indisputable point is the possibility of distributing profits or dividends to partners and shareholders after the approval of the plan, that is, throughout the period in which the recovery plan is being fulfilled, including within the inspection period (02 years) and any grace period.

Thus, according to Law 11.101/2005, there is no obligation to take the point to the creditors' deliberation, however, nothing prevents the issue from being part of the company's means of recovery. The reorganization of the company undergoing judicial reorganization necessarily passes through the scrutiny of the creditors, they are the ones who decide the best course for the uplift and a matter as relevant as the distribution of dividends cannot be exempt from deliberation by the meeting.

Even if the time lapse between the approval of the plan by the general meeting of creditors and the granting of recovery by the judge is usually days - at most weeks -, there will be cases in which the issue will need to be addressed, and it is up to the courts to define the final term. restriction so that there are no misinterpretations that lead to the investigation of the practice of bankruptcy crime.

Finally, the indisputable point is the possibility of distributing profits or dividends to partners and shareholders after the approval of the plan, that is, throughout the period in which the recovery plan is being fulfilled, including within the inspection period (02 years) and any grace period.

Thus, according to Law 11.101/2005, there is no obligation to take the point to the creditors' deliberation, however, nothing prevents the issue from being part of the company's means of recovery. The reorganization of the company undergoing judicial reorganization necessarily passes through the scrutiny of the creditors, they are the ones who decide the best course for the uplift and a matter as relevant as the distribution of dividends cannot be exempt from deliberation by the meeting. 

[1] COELHO, Fábio Ulhoa. Comments on the new Bankruptcy and Corporate Recovery Law, 15th Ed.; Sao Paulo, RT, 2022. page 75.

[2] CAMPINHO, Sergio. Commercial Law Course - Bankruptcy and Company Recovery, 12th Ed., São Paulo. Hail. 2022. Page 199.

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